CPA FAR - Governmental Flashcards
What are the characteristics of information in governmental financial reports?
- Understandability
- Reliability
- Relevance
- Timeliness
- Consistency
- Comparability
Understandability
Information in financial reports should be expressed as simply as possible so the reports can be understood by individuals who may not have detailed knowledge of accounting principles.
Reliability
Reports should be verifiable and free from bias and should faithfully represent the subject matter.
Note: This does not imply precision or certainty.
Relevance
Information provided should have a close logical relationship to the purpose for which it is needed. This implies reported information will make a difference to users.
Timeliness
Reported information should be issued in time to have an effect on decisions. This may supersede absolute precision or detail.
Consistency
The accounting principles used to prepare financial reports should not change year over year. Accounting principles relate to such issues as transaction valuation, basis of accounting, and the determination of the financial reporting entity.
Comparability
Differences between financial reports should be due to substantive differences in underlying transactions or government structure rather than the selection of methods. AKA financial reports should be comparable.
What are the three fund categories?
- Governmental Funds
- Proprietary Funds
- Fiduciary Funds
What are the different funds that fall under the Governmental Fund?
- General Fund
- Special Revenue Funds
- Debt Service Funds
- Capital Projects Funds
- Permanent Funds
What is the General Fund?
The general fund is set up to account for the ordinary operations of a governmental unit that is financed from taxes and other general revenues. All transactions not accounted for in other funds are accounted for here.
What is the Special Revenue Fund?
The special revenue fund is set up to account for revenues from specific taxes or other earmarked sources that are restricted or committed to finance particular activities of government.
Taxes for a specific purpose
What is the Debt Service Fund?
The debt service fund is set up to account for the accumulation of resources and the payment of interest and principal on all “general obligation debt,” other than that serviced by enterprise funds or by special assessments in another fund.
What is the Capital Project Fund?
The capital project fund is set up to account for resources restricted, committed, or assigned for the acquisition or construction of major capital assets by a governmental unit, except those projects financed by an enterprise fund.
What is the Permanent Fund?
The permanent fund is used to report resources that are legally restricted to the extent that income, and not principal, may be used for purposes supporting the reporting government’s programs (i.e., for the benefit of the public).
Note: You can’t touch the principle but can use extra from funds gained in the investment.
How should Governmental Funds be accounted for?
Using the following:
- Modified accrual basis
- Current financial resources measurement focus (i.e., no long-term assets or liabilities)
What are the funds in the Proprietary Funds?
- Internal Service Funds
- Enterprise Funds
What is the purpose of Proprietary Funds?
Proprietary Funds account for business-type activities (i.e., the government acting like a business).
How should Proprietary Funds be accounted for?
Using the following:
- Full accrual basis
- Economic resources measurement focus
What is the Internal Service Fund?
The internal service fund is set up to account for goods and services provided internally to another department and charging a fee.
What is the Enterprise Fund?
The enterprise fund is set up to account for the acquisition and operation of governmental facilities and services that are intended to be primarily self-supported by user charges. Customers of the enterprise fund are primarily external.
What are the funds in the Fiduciary (Trust) Funds?
- Custodial Funds
- Investment Trust Funds
- Private Purpose Trust Funds
- Pension (and Other Employee Benefit) Trust Funds
How should Fiduciary (Trust) Funds be accounted for?
- Full accrual basis
- Economic resources measurement focus
What is the Custodial Fund?
The custodial fund is used for temporary custody of the governmental unit (i.e., taxes collected for another governmental entity) and any fiduciary activities that are not required to be reported in other fiduciary fund classifications.
What is the Investment Trust Fund?
The investment trust fund accounts for external investment pools.
What is the Private Purpose Trust Fund?
The private purpose trust fund is used for activities not properly accounted for either as a pension or investment trust funds, in which assets are dedicated to providing benefits to recipients in accordance with benefit terms and assets are legally protected from creditors of the government.
What is the Pension (and Other Employee Benefit) Trust Fund?
The pension trust fund is for resources of defined benefit plans, defined contribution plans, post-employment benefit plans, and other long-term employee benefit plans.
What funds use the Current Financial Resources method?
GRaSPP
General Fund
Revenue Special Fund
and
Service Debt Fund
Project Capital Fund
Permanent Fund
What funds use the Modified Accrual basis method?
GRaSPP
General Fund
Revenue Special Fund
and
Service Debt Fund
Projects Capital Fund
Permanent Fund
What funds use the Economic Resources method?
SE-CIPPOE and Government-wide
Service (internal)
Enterprise
Custodial
Investment Trust
Private Purpose Trust
Pension (and Other Employee benefit) Trust
What is the Current Financial Resources method?
Under the current financial resources measurement focus, fund balance is a measure of available, spendable, or appropriable resources. Only current assets and current liabilities are included on the balance sheet.
- No fixed assets are reported
- No non-current liabilities are reported.
What is the Modified Accrual Basis method?
Modified accrual basis is a blend of accrual and cash basis accounting.
- Revenue is recognized when measurable and available to finance the expenditures of the current period. The only difference between modified and accrual is the manner in which each basis defines the word available.
- Available under modified accrual means collectible within the current period or soon enough thereafter to be used to pay liabilities in the current period (generally within 60 days after year-end).
- Expenditures are generally recorded when the fund liability is incurred, with some exceptions (debt service expenditures both principal and interest are not recognized until either due or paid).
What is the acronym for governmental funds?
MAC-GRaSPP
Modified
Accrual Accounting
Current financial resources measurement focus
GRaSPP
What is the acronym for Proprietary and Fiduciary Funds?
SCARE
SE
CIPPOE
Accrual Accounting
Record non-current assets and liabilities
Economic resources measurement focus
